Over the past 18 months, South Florida’s scorching real estate market has been celebrated and well documented in these pages and other media, and with good reason.
Sales volume and prices have maintained extraordinarily high levels (especially in the luxury sector), with domestic buyers calling for the weather, lifestyle and COVID-friendly policies in our region, as part of the integration of virtual work and education. (The growing migration of tech and financial companies from high tax / cost-of-living communities like New York and California has also fueled this phenomenon.)
But real estate markets are complex ecosystems, and dramatic growth in one area will often lead to weakness in another. In the case of South Florida, the rapid and extreme loss of inventory has become a major impediment to this success, unnecessarily inflating prices and crowding out qualified buyers who simply want to free themselves from leasing.
Even my middle class and affluent clients are reluctant to sell their current home, fearing that they will face a limited and overpriced pool of purchase options if they are to stay in this market. (For the sake of transparency, this inventory shortage is also troubling for real estate professionals like myself, who prefer healthy, predictable and balanced markets to keep their business going.)
While this inventory shortage is a dark cloud over our industry, streaks of sunlight are starting to appear, potentially stabilizing the market in small but significant ways.
During the terrifying first months of the COVID pandemic, the federal government put in place two programs to help homeowners deal with serious financial uncertainty: mortgage forbearance and a moratorium on foreclosures. Forbearance allowed mortgage lenders to delay their monthly payments, and while more than 4 million homeowners were on the program as of May 2020, that number had fallen to 1.6 million by August 2021, according to the Mortgage Bankers Association.
The moratorium on foreclosures expired in July and deposits have already increased 27% from July to August, according to the 2021 report on the US foreclosure market from ATTOM, a mortgage data company and parent company of the market. RealtyTrac foreclosures. (A 60% increase from last year.)
While most experts say they don’t expect a flood of foreclosures in the next few months, the numbers are expected to increase gradually. With so many homeowners now facing foreclosure and / or repossession of mortgage payments, it’s safe to assume that a very large percentage will choose to sell in this sizzling market, creating more buying opportunities down the road.
Here in town I have already seen an increase in “short sales” resulting from these changes and have even placed offers on some for my clients. (Readers may recall the popularity of short sales in the aftermath of the Great Recession of 2008, in which thousands of homeowners found themselves “underwater” with their property valued below the mark. amount of their mortgage. In these transactions, lenders would accept the net proceeds of closing sales, satisfying a larger amount of mortgage debt.)
Over the past few weeks, I have had a surge of properties listed by my longtime and older clients who for various reasons are forced to enter the market at this point. This is a common trend when hot cycles are perceived to have cooled down a bit. Some just want to get in the game when they may demand higher prices, while others are willing to downsize due to major lifestyle or life cycle changes.
My own neighborhood in southern Coral Gables offers a glimpse of this trend. A single-family rental property (which once required a lease of $ 8,500 / month) hit the market at $ 2.75 million and was matched after a reduction to $ 2.45 million.
Nearby, an elderly couple eager to move into a luxury active adult community advertised their home for $ 1.45 million and found a willing buyer above the asking price in one day. Still, the youngest child of another longtime owner started college this semester, and they are also seriously considering downsizing. As members of the larger generation, baby boomers, and even older Gen Xers are experiencing these changes in greater numbers, we should expect the inventory to open up accordingly.
While this next trend is only just beginning, I believe it could have a positive impact on condominium availability in the years to come. As the Miami Herald has reported in-depth, there are many disparate factors that must coincide to make bulk building buybacks possible, but once completed, developers would have the option to completely renovate or raze and build new towers, creating hundreds of new units for buyers to consider. (With the added benefits of modern, safer construction materials and techniques.)
Small homes – between 750 and 1,750 square feet – made up about 35% of homes for sale in the area in August, according to new data from Realtor.com; a 9.1% increase over last year. These homes, which are generally more affordable, represent good opportunities for new owners. Like the owners mentioned earlier, the sellers of these tiny homes are choosing to register now to enter a dynamic market, but local agents also attribute this trend to migration out of South Florida, second home sales, or death of relatives.
Granted, I wouldn’t expect any of these factors individually to have a major impact on the available housing market, which will only ease noticeably when prices stabilize over a long and consistent duration. But taken together, they could put a dent in the inventory steel curtain facing South Florida buyers this year.
Christopher Zoller, board member of the Master Brokers Forum, is an agent at BHHS EWM Realty International. He served as Chairman of the Board of Directors in 2017 of the MIAMI Association for Realtors, which has 52,000 members, and can be contacted at 305-321-3221 and / or [email protected]